While current mortgage guidelines require only a 3% to 3.5% down payment to purchase a home, even that’s a hurdle for some folks. If this sounds familiar, I may have a solution if you have retirement savings. The approach depends on the type of retirement plan you have.

If you have a 401k, you may be able to borrow against the account balance, if your plan permits it. Typically, the loan is limited to the lesser of $50k or 50% of the balance. Note that if you’re not using the loan to purchase your primary residence, the loan typically must be repaid within 5 years.

For those folks who have an IRA, you cannot technically borrow from the account. However, if you’re buying or building your first home, you can take out up to $10k without the distribution being subject to the standard 10% penalty. Note that if your IRA contributions are with pre-tax income, you’ll owe income tax on the money you take out.

Before you exercise either of these options, I suggest you talk to your financial advisor about how tapping your retirement account will affect your retirement plans.

Let’s look at some recent changes to loan guidelines that make it easier to qualify for a mortgage. These changes apply to Fannie Mae conventional loans.

– First, many folks, especially those employed in sales, have been penalized when applying for a mortgage if they write off business expenses on their tax return. Underwriting rules said we had to deduct the written-off amount from qualifying income. Fannie has changed that. For salaried borrowers or those with commission income that’s less than 25% of total income, the new rules say we can ignore the expenses.

– Second, with recent home price appreciation, some homebuyers are choosing to keep their current homes and rent them. Previous underwriting rules required that the current home have at least 30% equity in order for us to count the rental income and required the homebuyer to have extra cash or reserves to cover up to 6 months of housing payments on the current home. The new rules eliminate the 30% requirement, but the homebuyer still may need reserves depending on the financial strength of the borrower.

– And, finally, if reserves are required, a borrower now can use 100% of vested retirement account balances to satisfy the requirement. The previous rules required that we use a discounting factor of 60%.

Despite the wild ride for equity markets over the last week, bond markets have moved relatively little. Usually when markets melt down, you see investors flock to the safety of bonds, pushing rates down, but not so much this time. I’ve seen lots of theories that try to explain why this time is different.

One theory says that markets still are expecting the Fed to raise short-term interest rates in Sep, and this is keeping pressure on rates. I’m not sure I buy this one given that the recent equity market chaos may have taken a Sep rate hike off the table.

Another says the US economy still shows relative strength. The drama has originated overseas, particularly with China. These theorists say it’s not clear that a Chinese collapse would drag down the US economy. I think this theory has some merit. While US economic growth isn’t stellar, it’s the best horse at the glue factory. This leaves the bulls in control of market movement, at least for now, and that means there’s a risk of rates bouncing back.

For those wanting still lower rates, I think we’re going to need continued market turmoil abroad before the bears take control at home. That’s certainly possible, but it’s also unpredictable.

After the financial meltdown, Fannie Mae and Freddie Mac decided they would limit their loan programs to folks who had no more than 4 mortgaged properties. Freddie finally is raising its limit to 6. The change becomes effective 10/26.

Over at Fannie Mae, it has created a special loan program that allows up to 10 mortgaged properties, but not all lenders offer the program, and it comes with slightly higher interest rates. Freddie’s change is to its conventional loan program, so a borrower who uses the program won’t face higher rates or other hurdles.

Freddie also is removing its requirement that an investment homebuyer have a two-year history of managing investment properties and is removing the requirement that the homebuyer maintain rent loss insurance in order to qualify.

These are huge changes that should make it easier for investment property buyers to qualify for conventional financing.

The jobs report last week was pretty much what markets expected, and rates responded with equivocation – down a little Fri, up a little today. Markets seem to be searching for direction again.

Some think that will come with the Sep Federal Reserve meeting. Most analysts are saying the jobs report was strong enough to give the Fed the green light to start raising short-term rates at that meeting, and I don’t disagree. However, I don’t agree that spells the end of low mortgage rates. The Fed directly influences short term rates. Longer-term rates, such as mortgage rates, are more sensitive to economic conditions and inflation. As we’ve discussed before, while the economy continues to add jobs at a modest pace, other measures of economic health are less robust. In particular, wage growth and retail sales both have been lackluster. Add to that a softening world economy, highlighted by a slowdown in China, and you have a good case for clouds on the horizon. Uncertainty is the friend of lower mortgage rates.

The report to watch this week is the retail sales report on Thurs. A strong report is likely to push rates up. A so-so report is likely to leave us meandering.

Could the conforming loan limit change this year? The Wall Street Journal seems to think so. If it’s right, this would be the first time in a decade.

The conforming loan limit is the maximum amount you can borrow on a loan financed by Fannie Mae or Freddie Mac. In all areas of TX, that limit is $417k. (In the early 1970’s, the limit was $33k.) A loan amount above the limit is called a jumbo loan, and those loans typically have stricter qualifying criteria, such as higher down payment requirements, and traditionally have carried higher rates. By contrast, the minimum down payment for a conforming loan is 3%.

The limit is based on median home-sale prices reported by the Federal Housing Finance Agency (FHFA) with some wiggle room for higher-priced areas. The Journal notes that home prices in many housing markets have climbed back to pre-recession levels.

We’ll know this fall if FHFA makes a change, which would become effective on Jan 1st.

USDA is raising its guarantee fee for the Rural Development home loan program on Oct 1st. The Rural Development program is one of the few no-money-down loan programs. It’s only available in areas USDA considers rural in nature, but that definition includes a lot of exurbs of major TX cities.

The guarantee fee is up-front mortgage insurance due at loan closing. Most borrowers choose to roll the fee into the loan amount rather than pay it at closing.

The fee is rising from 2% to 2.75% of the initial loan amount. On a $150k home, that will raise the monthly payment by about $5.50 at today’s interest rate.

USDA is not changing its monthly mortgage insurance rate, called the annual fee, which remains 0.5% of the loan balance.

Please note that USDA will apply the change based on the date it commits to the loan, not the date the borrower applies. In order to beat the change, you really need to find a home this month as it generally takes about 30 days from contract signing to USDA loan approval.

Bond markets are still searching for something to motivate a move towards higher or lower rates. We had a contender last week with very weak wage growth and economic turmoil overseas. But this was really just more of the same, and with the jobs report due this week, markets hit the pause button again.

Look for two things from the jobs report on Fri. First, analysts predict the economy gained a bit more than 200k jobs last month. If the reality was very different from that, rates are likely to move. I think fewer jobs created is the more potent miss because it will reinforce a budding narrative that the economy is softening.

Maybe the more important aspect of the report will be reported wage growth. Earlier this year, it appeared that wages, which have been stagnant during this recovery, finally might be rising. But recent economic reports have turned any hope to despair. Friday’s report could revive that hope if it shows significant wage growth, and that could prod rates higher.

The wildcard out there right now is China. The Chinese economy is slowing. The question is how much that will affect the US economy. It’s too soon to tell, but the uncertainty will keep some downward pressure on rates.

The House of Rep is considering the Flood Insurance Fairness Act of 2015, which expands on last year’s changes to the flood insurance program by providing rate relief for second homes and rental properties. The intent is to allow these homes to receive the same flood insurance premiums as primary residences. While those who experienced the rate shock last year are probably cheering, I question whether this puts the solvency of the program at risk again. The House has a companion bill, the Flood Insurance Market Parity and Modernization Act, which is supposed to address the solvency issue. I’ll update you as I hear more about how these bills will affect both the program and premiums.

Regardless of the outcome of this legislation, one important change to the program already is in effect. Outbuildings that lie in the flood plain no longer result in a flood zone designation for the entire property. The outbuilding must be detached from the primary residential structure and cannot serve a residential purpose, such as sleeping, bathroom, or kitchen facilities.